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MEE Outlines (Jacob using John/Erin) > Secure Transactions > Flashcards

Secure Transactions Flashcards

1
Q

What should be the first sentence of any secured transaction answer?

A

Article 9 of the UCC governs any transaction regardless of its form that creates a security interest. This includes security interests in both tangible and intangible property.

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2
Q

What are the three things that must happen for a security interest to attach?

A

1) Creditor must give debtor value (service, cash, loan, forbearance on preexiting debt, or access to a line of credit) “Value was given”

2) Debtor must have rights in the collateral (ownership or power to transfer rights in the collateral)

3) Security Agreement or possession/control of collateral – agree to grant the secured party a security interest by

  • creditor taking possession of collateral
  • authenticated security agreement
  • creditor taking control of consumer deposit accounts
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3
Q

What two features does a creditor need to feel secure in their interest?

A

Attachment

Perfection

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4
Q

Definition of Attachment

A

The security interet is made effective, usually by the loan agreement and makes the security interest in the collateral effective against the debtor

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5
Q

Security Agreement Requirements

A

1) written and shows intent to create a security interest
2) authenticated by debtor (signed or marked)
3) describe collateral

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6
Q

Does order of the 3 attachment requirements matter?

A

Nope just all three have to be completed to attach

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7
Q

Tangible collateral types under Article 9

A

consumer goods - personal use

equipment - goods used by a business but not sold

inventory – goods held for sale by a business

farm products – unique to farming ops (animals, feed, seeds)

fixtures – something attached to a building in a permanent way that is considered part of the real property

computer software

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8
Q

Intangible Collateral

A

1) accounts receivable – think unpaid invoices

2) chattel paper (movable property)

Deposit accounts – checking/savings account

investment property – stocks and bonds

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9
Q

Sufficient description of collateral in a Security Agreement

A

It must reasonably identify what is described such that it is objectively and reasonably determinable

VIN numbers and legal descriptions are not required

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10
Q

Is “all assets” a sufficient description?

A

No

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11
Q

Do electronic signatures, fingerprints, intitials, etc work for authentication?

A

Yes they do

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12
Q

Possession of tangible objects

A

Possession is of tangible objects and includes things like holding collateral like at a pawn shop.

It proves your intent to encumber the property.

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12
Q

What are the alternatives to security agreement?

A

Possession and control

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12
Q

Control (security agreement alternative)

A

Involves control of intangible objects and is done by giving legal control over it and being able to withdraw from it

Banks do it by having the account in their bank, putting the name of the creditor on the account

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13
Q

After Acquired property clauses

A

You can add an “after-acquired” property clause in the security agreement to have an interest in inventory or assets acquired after signing the agreement.

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14
Q

What happens if the debtor transforms or sells your collateral?

A

Automatic perfection for 20 days in whatever he transforms it into.

Must file a financing statement or it unperfects on day 21

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15
Q

Step 2 after attachment

A

Perfecting the security interest

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16
Q

What is the effect of perfection?

A

It gives a lender rights against the world and puts them on notice.

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17
Q

To be legally adequate what should a description include

A

Collateral type

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18
Q

Financing Statement Requirements

A

Typically filed with State Sec of State

Provides:
name of debtor
name of secured party
description of the collateral

19
Q

Sufficiency of Name on a Financing Statement

A

Corp - name on statement must match the name of the debtor as recognized with the state

individual - name on driver’s license

If an ordinary search doesn’t bring up the right name, the error invalidates it

20
Q

Effect of a Financing Statement

A

It perfects the security interest and puts the world on notice

21
Q

Purchase Money Security Interest (PMSI)

A

A PMSI is created when

1) the secured party sells the good to the debtor on credit and retains a security interest in the goods sold (PPMSI) OR

2) the creditor loans the funds to the debtor to enable the debtor to buy specific collateral, those funds are used by the debtor to acquire the specific collateral, and the creditor takes a security interest in the collateral. (FF PMSI)

22
Q

Exception to the After-Acquired Assets clause

A

Invalid for consumer products. They have to be products that are acquired within 10 days of the creditor providing the value

23
Q

Proceeds Defined and Rule

A

Proceeds are whatever is received upon the sale, exchange, collection, or other disposition of collateral or proceeds and attach automatically when identifiable.

24
Q

Secured Transactions OOO

A

1) Is there an interest? (lease or secured interest – look for remaining economic value in the thing)

2) Did it attach? (security agreement/possession/control, value to debtor, rights retained by debtor)
- proceeds (automatic if identifiable)
- after-acquired valid if specific, unless consumer goods

3) Was it perfected?
- Financing statement
- taking possession of collateral
- control
- automatic perfection (Consumer/Equipment PMSI? Moto-vehicle cert of title exception? Dealer?)
- temporary perfection

4) Competing interest?
P v P (first in time unless consumer/equipment PMSI)
P v. UP (P wins)
P v. Judgment (File or perfect

25
Q

Effect of Debtor Moving to another State

A

State where debtor resides controls generally, but when the debtor moves the creditor has 4 months to reperfect under that state law or it becomes unperfected

26
Q

Temporary Perfection

A

PMSIs in non-consumer goods like equipment or inventory is perfected for 20 days, if a financing statement not filed within those 20 days, the security interest is unperfected after.

27
Q

Original Use Test

A

A debtor’s original intended use of collateral govern’s the collateral’s classification.

28
Q

Perfected v. Perfected

A

The first in time wins.

29
Q

Can you perfect via repossession?

A

Yes, as possession is a means of perfection

30
Q

Consumer PMSIs

A

A consumer good PMSIs automatically and permanently perfect

31
Q

Perfection for Proceeds

A

If a secured party has a perfected security interest in collateral, the secured party automatically has a perfected interest in any proceeds of the collateral for 20 days after the receipt of the proceeds.

After 20 days will remain perfected if

1) proceeds are identifiable cash proceeds

2) filed a financing statement in the same place as the collateral

3) you perfected within the 20 days

32
Q

Does a financing statement need to mention after acquired property to perfect in it?

A

No, a financing statement need not mention after-acquired property to perfect a security interest in it if the description is broad enough to cover it.

Compare to security agreements where after-acquired property needs to be specifically mentioned

33
Q

Which state’s law govern’s perfection?

A

Generally the law of state where debtor is located – their principal residence if an individual and their where registered or organized if a corp.

If unregistered, primary place of business

34
Q

Exceptions to Location Perfection rules

A

Possessory itnerests in fixtures and timber to be cut are governed by where the collateral is located

Goods covered by certificate of title are in the state issuing the most recent certificate of title

Deposit accounts – the state in which the bank has its chief executive office

Investment property – where certifiedsecurity is located
uncertified security – state where issuer was organized

35
Q

When does a security interest attach to proceeds?

A

When the proceeds are identifiable

36
Q

Perfected Interests and Sales

A

When a buyer buyer or leases something with a security interest on them, the security interest stays unless

1) authorized sale

Unauthorized but the buyer is a buyer in the ordinary course or it is a consumer-to-consumer sale

37
Q

Buyer in the ordinary course

A

1) in good faith
2) without knowledge that the sale violates the rights of another person
3) in ordinary course of business from a seller in the business of selling goods of this kind

38
Q

Consumer to consumer sales

A

A buyer takes free of a security interest even if perfected if

1) buyer buys without knowledge of the security interest
2) for value
3) for the buyer’s personal use
4) before a financing statement cover goods has been filed

  • must be consumer to consumer sale
39
Q

Secured Party v. Judicial Lien Creditor

A

A prior perfected takes priority over a judicial lien.

If the lien creditor becomes such before interest –> prevails

Grace period of 20 days for PMSIs

40
Q

Secured Party v. Possessory Statutory Lien

A

Statutory lien prevails

41
Q

Perfected v. Gift receiver

A

A gift receiver doesn’t purchase for value so cannot be BIOC and so the secured interest stays attached

42
Q

Buyer not in the ordinary course of business

A

Takes subject to perfected security interst

free from unperfected security interest unless they know of the security interest when they give value or take delivery

43
Q

Self-help Repossession

A

Permissible as long as it is done without a breach of the peace. If you breach the peace, you lose authorization and may be liable for conversion

44
Q

Breach of the peace

A

potential to lead to violence, such as breaking and entering

45
Q

Resale of Collateral

A

requires a resaonable notification
1) to the debtor and sureties in the debt
2) to any other secured parties who have notified the secured party of their interests
3) secured parties who perfected by filling financing statements or making a notation on a certificate of tile

notice 10 days or more before sale

46
Q

Standard for Sales

A

all aspects of a sale must be commercially reasonable and the creditor is liable for damages if it is notC

47
Q

Contents of a Notice of Sale

A

Public – notice of time and place

Private – notice of time after which the sale will occur must be given

MEE Outlines (Jacob using John/Erin) (11 decks)

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